What we know: How savings can protect your family during a recession
Here are some strategies and savings to protect your family during a recession. Here’s what we know so far:
If you’re wondering whether the U.S. economy is in recession, close to recession, or okay, you’re not alone.
The answer may depend on where you live, said Mark Zandi, an economist at Moody’s Analytics.
According to his analysis, 21 states and the District of Columbia, which account for about a third of U.S. economic activity, are already in recession. He said another 13 states, representing about another third of the economy, are stagnant, while the remaining 16 are growing.
Even if the country isn’t in a recession, if you live in a state that is or is on the brink of a recession, you’re probably already feeling the pinch.
“State-level data reveals why the U.S. economy is on the brink of recession,” Zandi said.
Why are some states in or near recession?
Most states in or near recession are producing goods, Zandi said. He said agriculture, mining and light industry were currently vulnerable, which was exacerbated by weakness in the transport sector.
But Zandi said, “The Washington, D.C. area stands out as a result of government job cuts.” The federal government is one of six industries he sees in recession. Others include transportation and distribution, agriculture, mining, manufacturing, and construction.
“Naturally, the industries that are suffering the most are the most affected by higher tariffs, very restrictive immigration policies, and DOGE (Department of Government Efficiency) cuts,” he said.
Zandi said New England states generally have slower populations and therefore tend to have weaker economies than other regions even in good times.
Some states, such as Georgia and Illinois, also have high prices, which is hindering population growth, he said.
What is supporting other states?
Zandi said states like Texas and Florida have generally always fared well, in part because of their low taxes.
Penn State surprised him with a turnaround. “We’re doing well because of health care and education,” he says. “Philadelphia and Pittsburgh are running the train.”
Other growing industries include technology, state and local government, and real estate, he said.
Why are California and New York states to watch?
Zandi said California and New York are on track to avoid recession so far. If one side goes into recession, Zandi predicts the rest of the country will be dragged into it as well.
Together, these two states account for more than one-fifth of the nation’s economic growth. “Stability is extremely important to avoid a national economic downturn,” he said.
How likely is the U.S. to go into recession?
Most economists don’t expect a full-blown recession, defined by the National Bureau of Economic Research as a significant decline in economic activity that spreads throughout the economy and lasts more than a few months. The NBER is the official arbiter of when a recession occurs.
Zandi also said he was hopeful that a national recession could be avoided, but only at a whisper. “Fiscal and monetary policy should help the day and bring victory,” he said.
But for many Americans, he said, simply overlooking the recession won’t make them feel good.
“Firewalls are a redundancy,” Zandi said. “They’re still at very low levels. As long as they stay low they should be fine, but it’s unpleasant because companies are stopping hiring and cutting back on hours. They’re taking all the steps short of layoffs, and it’s going to be an unpleasant situation until they start hiring again.”
With 70% of the country currently in or approaching recession, Americans are already feeling depressed. The University of Michigan Consumer Survey found that sentiment in September compared to the previous month showed that “a wide range of consumers across age, income, and education groups are feeling pressure from both the prospect of higher inflation and the risk of weakening labor markets.”
Is the economy out of crisis?
Most economists revised their forecasts upward after economic growth in the April-June period came in at 3.8%, which was better than expected. Economists at Wells Fargo said strong consumer spending continues to support the economy.
But Zandi still sees the situation as volatile, with many risks that could upend the economy. He said these include:
- Second week of government shutdown lasting 1-2 months
- Major AI companies expect earnings to slow
- People don’t like Trump being nominated to replace Fed Chairman Jerome Powell next year
- Countries retaliate against US tariffs
- If the Fed cuts interest rates too aggressively, inflation will rise.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
